ECB picks 4 asset firms

The ECB has picked four asset managers to aid purchases of asset-backed securities that it says will start next month.

ING Investment Management, Deutsche Asset Wealth Management International, State Street Global Advisors, and Amundi will execute transactions for national central banks, the ECB said yesterday.

The four asset managers will act on “explicit instructions” from officials, who “will undertake price checks and due diligence prior to approving the transactions”.

The ECB started buying covered bonds last week in the first step in a purchase programme aimed at expanding its balance sheet by as much as €1 trillion. While its main objective is to fight low inflation in the eurozone, the addition of asset-backed securities to its purchases also aims to revive Europe’s securitisation market.

“In contrast to covered bonds, the ECB has not much experience in buying asset-backed securities,” said Ruben Van Leeuwen of Rabobank. “However, the asset class is well suited for credit easing, and that’s already working.”

In its third foray into that market in six years, the ECB settled €1.7bn of covered-bond purchases last week after acquiring securities in the secondary market. The ECB bought bonds in the new-issue market for the first time this week, according to sources, and ABN Amro Bank said it may buy a portion of the €750m bonds sold yesterday by Italy’s Credito Emiliano.

Bayerische Landesbank, Germany’s second-biggest state-owned lender, said it will return €1.1bn to the state of Bavaria after selling asset-backed securities with a nominal value of €6.5bn in an auction, taking advantage of a rally in prices spurred by the ECB’s purchase plans.

ECB president Mario Draghi has said purchases of asset-backed debt will start before the end of the year and may include notes from the junk-rated nations of Greece and Cyprus. He has made the revival of the asset-backed securities market, which has shrunk more than 40% since 2010, a top priority, arguing it will allow banks to increase lending and boost economic growth.

Banks create asset-backed notes by bundling individual loans such as mortgages, car credit, and credit-card debt into tradable bonds.

The notes allow the transfer of risk from banks to investors and may encourage them to offer more credit.

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Friday, October 31st, 2014 EN

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